Condominium or cooperative unit owners own only the inside of their units. The outside of their units are owned by the condominium association or the cooperative. All insurance-related issues must be evaluated based on the condominium or cooperative bylaws. The bylaws define ownership, and this determines the required amount of property insurance. It also determines the unit-owner’s liability exposure. This type of shared ownership is expanding to include “landominiums” where the structures are entirely owned by the unit owners but all land is owned and maintained by the association. There are also “dockominiums” where the vessels are owned by the unit owners but the docks and piers are under association ownership.
Your furniture, clothes, sports equipment, and other personal items are covered if they are stolen or destroyed by fire, hurricane, or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.
This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions.
Expensive items like jewelry, furs, and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for its appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.
The typical homeowners policy offers plenty of coverage for personal property, usually offering a limit equal to half of the amount reserved for the residence (ex. your home is covered for $150,000, so your contents and furnishings are covered for $75,000). While this is generous coverage, it doesn’t extend to all types of property for all causes of loss. Certain types of property, because of its high value and liquidity, is far more vulnerable to loss either easily destroyed, easily stolen or both. For instance, an insurer protects your sofa right along with your fur coat for the same basic premium, but the two types of property don’t represent the same chance of loss. Recognizing this fact, insurers put more restrictions on the coverage provided by a basic policy.
Theft Coverage Limitations
When property is lost due to theft, coverage under a standard homeowner policy is severely limited (generally between $1,000–$2,500) for the following types of property:
- Jewelry, watches, furs, and gemstones
- Dinnerware, serving sets, trophies, and similar property made of or plated with silver, gold, platinum, or pewter
- Firearms, accessories, and related property
Other Coverage Limitations
Several categories of property are subject to very modest limits (generally between $200–$2,500) of coverage, regardless of the cause of loss (theft, fire, accidental breakage, etc). Specifically:
- Money, bank notes, coins, medals, gold, silver, and platinum (other than jewelry or dinnerware)
- Securities, accounts, deeds, tickets, stamps, manuscripts, passports, and similar property
- Watercraft and related property including their trailers
- Trailers not used with watercraft
- Business property located in your residence
- Business property located away from your residence
- Certain types of electronic property (CD players, VCRs, TVs, radios, computers, and related accessories) which is lost or damaged while in a car or is located away from your home and used for business
Remind me about homeowners limitations
The typical homeowners or renters policy contains substantial coverage limitations for certain types of property. The modest insurance protection affects property that is highly vulnerable to loss because it is targeted for theft and/or has a high level of value in relation to its size. Examples are gold, money/securities, precious metal-plated dinnerware, jewelry, furs, stamps, electronic property, business property, watercraft, and firearms.
How do you handle the limited coverage situation? You have to do something extra to your insurance program. Insurance companies are happy to provide more coverage, if they are paid for their trouble. Specifically, limited coverage can be handled using the following methods:
- Increased Coverage C Endorsement—This form is only appropriate for property saddled with limited coverage for theft losses. This form is attached to a basic policy, and it increases the theft insurance limit (i.e., for jewelry from $1,500 to $5,000).
- Scheduled Personal Property Endorsement—This form is used for increasing coverage for property that has protection reduced for all sources of loss. The property is removed from the basic policy’s limits and is covered exclusively by the endorsement. This form takes more work since each item of property has to be listed and assigned a particular insurance limit.
- Inland Marine Property Floater—This method works like the personal property endorsement, except that it is a separate policy. This alternative is more appropriate for persons owning substantial amounts of high-valued property. The coverage must often be purchased from specialized insurers and comes at a high cost. In order to qualify for such coverage, you may need to meet special circumstances such as having a residential alarm system or make using of vault storage.
Another advantage of special handling – In order to arrange coverage under a schedule or an inland marine policy, the property must be properly valued. This often involves appraising the property. It’s very helpful to have an expert source establish the current value of jewelry, furs or other valuable possessions. In fact, such property should be appraised every two or three years since their values often increase over time.
If you home or property is damaged and it is uninhabitable, the loss of use will pay for you to live someplace else. You have a bad smoke smudge loss and you need to stay in a hotel for 7 days while the house is cleaned. This is covered by loss of use. The wind blows your roof off and it takes 6 months to rebuild. The loss of use would pay for you to rent another house while you are displaced.
Loss of use on vacation or rental properties would provide payment for any lost rents that would occur when the apartment or property is not habitable.
Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter, or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.
The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.
Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $500,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.
Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.
When you own a condominium, there is an unusual exposure called Loss Assessment. This is NOT the assessment from the association for lawn moving, new windows, or snow removal. This deals with losses incurred by the condo association. These can include losses for which the association has NO coverage, or they have insufficient coverage.
A sinkhole opens and damages a condo unit. The association does not have sinkhole protection. The association will assess each condo owner their share of the loss and this would be covered by loss assessment.
There is a lightning strike at the condo’s pool and two people are killed. The lawsuits result in a $2 million award and the association has only $1 million of coverage. The difference is assessed against each owner for their share.
Condominiums are the most confusing property insurance issue. Condominiums are protected by two policies; the Master Policy and the insured’s HO-6. The Master policy covers a defined aspect of the building. The HO-6 is designed to protect the portion of the building for which the insured is responsible. Sound confusing? It is. In addition to the need to insure the portion of the building for which the insured is responsible, the HO-6 Betterments coverage should also include enough protection to cover the deductible of the association.
Betterments include any improvements you have made. There was carpeting and you replaced it with marble tile. Increase your betterments coverage to include the cost of the marble. You replace Formica counter-tops with granite. Increase your betterments coverage to reflect the cost of that improvement. Your association had a $2500 deductible and now they have a $10,000 deductible. Increase your betterments coverage by $7500 to cover the additional exposure.